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Trader Joe

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15 views

Trader Joe

Uploaded by

psychoslightly
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Aimen Noor

20110086

Trader Joe
1) How do firms in the supermarket industry make money?

 The super market has been traditionally operated on thin profit margins
due to immense competition in the industry as barriers to entry such as
setup costs and government regulations are minimum.
 Many supermarkets identify sales patterns and trends and then create
value and profits by altering their portfolios and marketing mechanism
according to it.
 Moreover, many supper markets buys in bulk and get the benefit of
economies of scale i.e. lower cost per unit. These help supermarkets to
maintain their profitability and also pass the lower prices to consumers
which ultimately makes the supermarkets more competitive and helps
to increase and maintain sales.
 Some supermarkets also provide coupons/sales and discount
promotions to attract more sales. Others have introduced loyalty card
programs in order to maintain customers.
 Supermarkets have also incorporated the use of technology in to their
selling and customer service process. This provides faster and hassle
free shopping experience and helps to increase customer turnover.
 Strong supply chains also helps some super markets to hold strong
roots in then industry.

2) What are the key sources of Trader Joe’s competitive advantage?


 Firstly, Trader Joe’s has chosen a niche market for itself. It sells to
highly educated class with higher income levels who have more money
to spend on store.
 Trader Joe’s portfolio includes products that are difficult to find at
competitors. It provides a completely different variety of product. This
serves as a huge attraction point for the customers.
 Moreover, the quality of its products are much more higher than that of
competitors and the prices it charges for these high quality products are
same as of the low quality items of other supermarkets.
 It has saved on costs by keeping minimum working capital and has
reduced inventory holding and storage costs.
 It buys in bulk from its suppliers. These low costs increase profitability
and are even passed on to customers.
 Trader Joe re-stocks its shelves even during the daytime. This ensures
consistent supplies and no lost sales.
 It is located on old strip suburbs areas with less than 15000 sq. ft. of
selling area. This helps trader Joe’s to save on rent and property costs.
Also, it is nearest to the consumers, which provides convenience to
them.
 It does not reveal the name of its suppliers and so the competitors are
unaware of Trader Joe’s dealing. It has established strategic relations
with its suppliers.
 It relies on word of mouth as part of promotion and saves on television
advertisements. Words of mouths have a long-lasting impact.
 It is resistant on technology and has saved immense amounts and
allocated it to customer service.
 Trader Joe employs high quality workers and provides them with
generalist training. It also pays them high wages so that they do not
shift to other supermarkets. This helps to provide high quality
customer services.

3) What are the main threats to Trader Joe’s competitive advantage? Is their
advantage sustainable?
 Trader Joe has created competitive advantage through long-term and
strategic relations with suppliers, customer loyalty by providing a
unique set of services and corporate cultures. These three things are
very difficult for other firms to copy. They have chosen a niche set of
market, which is difficult to penetrate into for other supermarkets.
These provide sustainable advantage to the supermarket. It may take
years for other firms to adapt such models.
 However, since the e-commerce and technological adoption is
increasing at a faster pace, it may pose a threat to Trader Joe as it may
appear as conventional after some time and the technology may be able
to provide faster consumer services and reduced costs for
supermarkets.
 Wal-Mart has already opened small location stores. Through this,
Trader Joe may loose its unique point, as it is easy to imitate.
 Also, new rivals are rapidly entering into market copying Trader Joe
and bringing new ideas.

4) How would you modify Trader Joe’s strategy moving forward?


 Use of technology should be incorporated to increase the value of
consumers and reduce operational costs of the business.
 Corporate culture should be evolved with time and not kept same as the
firm keeps on growing. Larger firms have a different set of corporate
cultures as compared to smaller ones. In a much larger firm, employees
become more difficult to handle.
 As Wal-Mart is moving to smaller locations and same level of service as
that of Trader Joe, it should consider giving occasional discounts and
promotions to compete with Wal-Mart as its competitive advantages will
be copied by other super markets with time.

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